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Old El Paso Case Study CSCM0297/Published 01/2010

DATAMONITOR VIEW

CATALYST

The meal kit concept is a growing sector of the ready meal market, capitalizing on consumer demand for value for money

and providing time-saving meal options that encourage family togetherness. This case study considers one of the most

successful brands in the sector, Old El Paso, and looks at how the brand has maintained high growth through its high-

profile marketing campaigns.

SUMMARY • The meal kit is a burgeoning meal concept that is gaining popularity in Europe and North America. Usually

consisting of pre-measured dry ingredients presented in a box, the meal kit is promoted as being a quick and

easy way to create family meals.

• One of the leading meal kit brands is General Mills-owned Old El Paso. While the brand consists of a range of

Mexican food ingredients and products, its main product is the meal kit, which comes with tacos or burritos

along with the seasoning, sauces and recipe needed to create a Mexican-themed meal for a family of four (the

customer just needs to add meat and/or vegetables). The brand has consistently performed well, achieving

strong results in the recent downturn and undertaking relevant marketing to ensure success when the

economy recovers.

CASE STUDIES

Old El Paso Case Study Addressing the connectivity trend with the meal kit concept

Reference Code: CSCM0297

Publication Date: January 2010

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

ANALYSIS

Meal kits are a growing offshoot of ready meals that address convenience and connectivity trends

Usually consisting of pre-measured dry ingredients presented in a box, the meal kit is promoted as being a quick and easy

way to create family meals. The user normally has to add fresh ingredients such as meat and vegetables to the dish, while

the meal kit provides the user with instructions on how to cook the meal. These kits usually feature foreign foods such as

Mexican or Chinese cuisine, as the format promotes experimentation in the kitchen, providing the user with the confidence

to produce meals they would not normally serve.

Meal kits attract consumers who are looking for ready meals with added qualities

Meal kits are an offshoot of the ready meals market and are gaining appeal due to their nature. A certain degree of effort is

required in making them conducive to a sit-down meal, and so consumers gain the satisfaction of preparing the meal, at

least partly, for themselves and their families. This contrasts with the detached and often individual experience of preparing

(and consuming) ready meals or consuming take-away food.

The ready meals market has been performing solidly in recent years, as Table 1 shows. In Europe, the market is worth over

$28 billion, with the UK being the leading consumer, while the North American market is worth around $18 billion. However,

growth is forecast to be comparatively nondescript over 2009–13, meaning that meal kits could provide market players with

a strong impetus to enhance growth.

Datamonitor's Product Launch Analytics recorded that the US, the Netherlands and the UK launched the highest number of

meal kits over 2007–09 (see Figure 1). However, over the past five years, meal kits have come to market fairly erratically.

Figure 2 shows that while 2005, 2007 and 2009 were strong years for meal kit launches around the world, 2006 and 2008

saw fewer launches. Nonetheless, with their appeal centered on their money-saving abilities (due to their packing the

majority of ingredients needed for a meal in one box) and the creation of family meal times, their appeal should grow and

encourage more manufacturers to enter the market.

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

Table 1: The leading countries in the ready meals market in North America and Europe ($m), 2003–13

2003 2009 2013 CAGR 2003–09 CAGR 2009–13

United Kingdom 4,370 5,589 6,202 4.2% 2.6%

Germany 3,582 4,741 5,640 4.8% 4.4%

Russia 2,272 3,599 4,431 8.0% 5.3%

France 3,059 3,460 3,955 2.1% 3.4%

Spain 1,446 2,054 2,509 6.0% 5.1%

Italy 1,003 1,420 1,696 6.0% 4.5%

Denmark 846 869 906 0.5% 1.0%

Netherlands 520 636 717 3.4% 3.1%

Norway 547 604 656 1.7% 2.1%

Sweden 448 587 680 4.6% 3.8%

Europe overall 21,903 28,742 33,629 4.6% 4.0%

United States 13,980 15,197 17,073 1.4% 3.0%

Canada 2,272 2,557 2,771 2.0% 2.0%

North America overall 16,252 17,754 19,844 1.5% 2.8%

Source: Datamonitor's Market Data Analytics D A T A M O N I T O R

Figure 1: The US is the leading market for meal kit launches

Source: Datamonitor's Product Launch Analytics D A T A M O N I T O R

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

Figure 2: Meal kit launches have been sporadic over the past five years

Source: Datamonitor's Product Launch Analytics D A T A M O N I T O R

Meal kits address the connectivity trend, enabling consumers to spend quality time with their families

Datamonitor's report, Global Consumer Trends: Connectivity (DMCM4696), established that connectivity—that is, the

desire for consumers to interact with their friends and family—is an important aspect of life and happiness fulfillment. It

noted that contemporary consumers believe that, due to the growth of dual income families and the logistical complexities

this creates, lifestyle pressures and the need to establish a positive work-life balance are greater now than at any point

since the turn of the 21st century. Therefore, meal kits are marketed as a way for consumers to more easily establish these

connections with their families and achieve a more positive work-life balance.

As well as quickening the meal preparation process and enabling more family time in this way, meal kits offer family

bonding opportunities through the potential for easy participation in the preparation process. For example, they can offer

appropriate tasks for children to get involved and help their parents.

Consumer opinion on family life could be beneficial to the meal kit concept. Datamonitor's 2009 consumer survey asked

respondents how satisfied they were with their family life. As Figure 3 shows, there generally appears to be a strong degree

of satisfaction around Europe, the US and Asia Pacific when it comes to connections with loved ones. That consumers feel

this way clearly indicates that friends and family are a priority once daily obligations such as work have been undertaken. In

addition, another Datamonitor survey question asked respondents if they were choosing to cook more from scratch than

they had previously. A high proportion said that they were actively doing so (see Figure 4), showing how consumers have a

desire to cook more for themselves. This is perhaps due to conceptions that home cooking is more nutritious and cost

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

effective, as well as giving the cooker pride in their achievements. Such attitudes help boost the appeal of meal kits as an

aid to cooking.

Figure 3: Family life achieves a high satisfaction rate around the world

QUESTION: Please state how satisfied you are currently with the following: Your family life

68.2%

12.0%

19.8%

70.4%

10.9%

18.7%

59.0%

13.8%

27.1%

10%

20%

30%

40%

50%

60%

70%

Satisfied or very satisfied Dissatisfied or very dissatisfied

Neither satisfied nor dissatisfied

% o

f re

sp on

de nt

Europe US Asia-Pacific

Source: Datamonitor consumer survey, 2009 D A T A M O N I T O R

Figure 4: Consumers are attempting to cook from scratch more often and be less reliant on ready meals

QUESTION: Compared to one year ago, to what extent would you say that you are making more efforts to do the following to save money because of the current economic downturn: Cook more from scratch or

with fewer convenience foods?

34.8%

10.7%

54.4% 49.6%

5.9%

44.5% 42.0%

10.0%

48.0%

10%

20%

30%

40%

50%

60%

70%

More effort or significantly more effort

Less effort or significantly less effort

No more or less effort

% o

f r es

po nd

en ts

Europe US Asia-Pacific

Source: Datamonitor consumer survey, 2009 D A T A M O N I T O R

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

Meal kits help consumers explore foreign foods with ease, but some ethnic cuisines perform better in this format than others

As well as addressing the convenience and connectivity trends, meal kits additionally address consumer desires for new

experiences, encouraging meal experimentation. By providing recipes and major pre-measured ingredients, meal kits

enable manufacturers to market novel gourmets which consumers would not normally try due to inexperience and lack of

confidence in these areas. In the three most popular nations for meal kit launches (as shown earlier, the US, the UK and

the Netherlands), the most popular types of food for meal kits are of Asian origin. Figure 5 shows a selection of recently

launched meal kits, all of which have an Asian theme. This is perhaps due to the familiarity of Asian foods in these

countries—in eating if not in cooking such meals—with ethnic consumers bringing such foods with them from their

countries of origin. However, Mexican food is also popular in the meal kit format, perhaps due to the fun and novel aspect

of eating with tacos and tortillas. With all of these dishes, the meal kit format enables consumers to gain a more 'hands on'

experience with creating novel meals than normal ready meals would allow.

Figure 5: Meal kits have an Asian food focus in their core markets

Source: Datamonitor's Product Launch Analytics D A T A M O N I T O R

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

Old El Paso is one of the strongest brands promoting the meal kit concept, addressing the convenience and connectivity trends

While Old El Paso's brand consists of a range of Mexican food ingredients and products, its main product is the meal kit,

which comes with tacos or burritos along with the seasoning, sauces and recipe needed to create a Mexican-themed meal

for a family of four (the customer just needs to add meat and/or vegetables). The brand has consistently performed well,

achieving strong results in the recent downturn and undertaking relevant marketing to ensure success when the economy

recovers.

Figure 6: General Mills offers a range of meal kits and related items under the Old El Paso brand

Source: Datamonitor research D A T A M O N I T O R

Old El Paso is one of the oldest established meal kit brands

The Old El Paso brand was established in New Mexico in 1917, with its first product line consisting of canned tomatoes and

pinto beans. By 1938, the brand had become established in the US, adding a taco sauce to its product line in 1946. Growth

continued in the 1950s, with the brand headquarters moving to Texas in 1958. In 1969, the brand gained a first by

becoming the first company to advertise Mexican food in the US. By 1970 Old El Paso offered an extended line of Mexican

meals, including meal kits, prompting US supermarkets to create Mexican food sections in their stores for the first time. The

brand expanded globally in the 1970s and 1980s, including the UK in 1984.

General Mills acquired the brand in 1995, when it purchased Pet, Inc, which itself took over the brand in 1968 from the

Mountain Pass Canning Company.

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

Table 2: Old El Paso product line

Meal kits Sauces/salsas Seasonings Taco shells/tortillas Beans/rice

Old El Paso Burrito Kit Old El Paso Cheese 'n Salsa Medium

Old El Paso Seasoning Mix Burrito

Old El Paso Taco Shells Old El Paso Cheesy Mexican Rice

Old El Paso Enchilada Kit Old El Paso Cheese 'n Salsa Mild

Old El Paso Seasoning Mix Cheesy Taco

Old El Paso Taco Shells Hard and Soft

Old El Paso Green Chiles - Chopped

Old El Paso Fajita Kit Old El Paso Enchilada Sauce Green Chile Mild

Old El Paso Seasoning Mix Chili

Old El Paso Taco Shells Stand 'N Stuff

Old El Paso Green Chiles - Whole

Old El Paso Jumbo Taco Kit

Old El Paso Enchilada Sauce Hot

Old El Paso Seasoning Mix Fajita

Old El Paso Taco Shells Super Stuffer

Old El Paso Jalapeno Slices Pickled

Old El Paso Nacho Kit Old El Paso Enchilada Sauce Medium

Old El Paso Seasoning Mix Taco Hot & Spicy

Old El Paso Taco Shells White Corn

Old El Paso Refried Beans Fat Free

Old El Paso Quesadilla Kit

Old El Paso Enchilada Sauce Mild

Old El Paso Seasoning Mix Taco Less Sodium

Old El Paso Tostada Shells

Old El Paso Refried Beans Spicy Fat Free

Old El Paso Soft Taco Kit Old El Paso Sauce Taco Hot

Old El Paso Seasoning Mix Taco Mild

Old El Paso Refried Beans Traditional

Old El Paso Stand 'n Stuff Kit

Old El Paso Sauce Taco Medium

Old El Paso Seasoning Mix Taco Original

Old El Paso Refried Beans Vegetarian

Old El Paso Taco Kit Old El Paso Sauce Taco Mild

Old El Paso Refried Beans With Green Chiles

Old El Paso Thick N Chunky Salsa Hot

Old El Paso Spanish Rice

Old El Paso Thick N Chunky Salsa Medium

Old El Paso Thick N Chunky Salsa Mild

Source: GeneralMills.com D A T A M O N I T O R

Old El Paso's growth remains strong as it appeals to families on a budget

Old El Paso has performed particularly well in one of its key markets, the UK, during the downturn, appealing to consumer

desires to create 'fun family time', while addressing their desires to economize. Value sales for the Old El Paso brand were

up 9.1% to £68m over the 2009 period (source: IRI), reflecting the brand's strong growth. The brand offers an appealing

concept for consumers; instead of going out for family meals, the brand offers an economical night in whereby family time is

encouraged: children can help out in creating the meal and can have fun around the table building their own taco/burrito

meals. This has led to brand growth at a time when other food brands have stagnated.

The brand has been marketed extensively in order to encourage regular family dining and a weekly 'taco night'

General Mills has acknowledged the need to expand Old El Paso's brand appeal beyond the recession by promoting the

meal kit in the US as enabling families to undertake regular fun dinner events. In this way, the economical aspect of the

meal kit has been seconded in its marketing to what it believes will give the brand more longstanding consumer appeal.

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

Of particular concern for General Mills is the need to increase the frequency with which the Old El Paso meal kit is

purchased. According to General Mills marketing director Peter McDonald, the frequency of taco consumption is less than

four times a year in the US, compared to around 17 times a year for pizza and spaghetti (source: adage.com).

In order to boost the frequency of tacos at home, the brand attempted to create 'taco night' as a regular family dinner event.

The Old El Paso campaign did not focus on the economical benefits of its taco kit, despite the obvious savings that such

kits offered, but rather the ritual of the ‘family dinner’. This ensured that the ritual would still be relevant once the economy

recovered. The marketing campaign included a dedicated microsite, ElTacodor.com, from which consumers could access

games, prizes and coupons. Such activity helped boost sales of the brand by 9% in the last quarter of 2009.

"[Consumers are] looking to make the most of that time together. Taco night is a time when families connect."

General Mills marketing director Peter McDonald, as quoted on adage.com, 2009

Figure 7: General Mills has promoted the Old El Paso brand as being a fun-loving family orientated brand

Source: Datamonitor research D A T A M O N I T O R

General Mills is working with grocery stores to promote the brand at point of sale

While some brands understandably feel threatened by private labels because of their potential to take away valuable

market share, General Mills has taken the unusual step of working with grocery stores to promote their private labels

alongside its Old El Paso range. However, instead of being the same products (i.e. tacos, tortillas etc.), the private labels

which it encourages stores to sell alongside the brand are meat, poultry and vegetables: fresh foods that are designed for

use with its meal kits. This is therefore mutually beneficial for both store and brand. General Mills also created Old El Paso

stations that are designed to be stocked with store-branded cheese, vegetables and meat alongside the Old El Paso kits.

At one Food Lion grocery store, for example, Old El Paso set up a 'taco night' display featuring its Old El Paso brand taco

shells, seasoning mix and refried beans, next to store-branded rice and ground beef.

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

Conclusions

General Mills has capitalized on consumer demand for time-saving value-led family meals in the downturn with the Old El

Paso brand, but the company is not resting on its laurels. Aware that consumer demand will change from being value-led to

desiring better meal experiences when the economy recovers, the company is promoting Old El Paso as a fun loving brand

that can enable families to get together. This therefore relates well to the connectivity trend.

The brand may gain added competition in future as more companies realize the potential of meal kits. Already, there are

emerging frozen food meal kits that include meat and vegetables; the user simply has to add the ingredients together at the

cooking stage. So far, however, Old El Paso has staved off this threat by maintaining successful high profile marketing.

Of some concern is the fact that General Mills has had less success with its other meal kit launches. It launched a Chinese

style meal kit in the UK in 2009 called Wanchai Ferry; according to the grocer, in its first seven months since launch it had

generated just £655,000 in sales. At this stage, then, Mexican cuisine appears to have an edge over other foreign food

types in this format, perhaps because it was not well established in the food aisle before the meal kit emerged, so that it

has less competition from other ethnic food lines. It remains to be seen whether Old El Paso can maintain its high level of

growth in the long term, but General Mills has implemented a strong marketing campaign to help it achieve as much.

Old El Paso Case Study

Old El Paso Case Study CSCM0297/Published 01/2010

APPENDIX

Case study series

This report forms part of Datamonitor's case studies series, which explores business practices across a variety of

disciplines and business sectors. The series covers a range of markets including food and drink, retail, banking and

insurance, pharmaceuticals and software.

Each case study provides a concise evaluation of a company that stands out in some area of its strategic operations,

highlighting the ways in which the company has become one of the best in its field or how it deals with different problems

encountered within that sector.

Methodology

This case study was compiled using a collection of both primary and secondary research, including Datamonitor’s own

consumer survey fieldwork. In addition to this, writing this case study also involved researching innovative product

formulations on Datamonitor's Product Launch Analytics Database, alongside an extensive review of secondary literature

and other in-house sources of information such as Datamonitor’s Market Data Analytics tool.

Secondary sources

• Old El Paso: an America's Hottest Brands Case Study (2009) Adage.com, November 2009

• Fully kitted out (2009) The Grocer, November 2009