At Nestle's $50 million research center outside Cleveland, food technicians and packaging experts set out three years ago to remake its frozen food lineup and appeal more to busy, health-conscious adults in their 20s and 30s. Nestle may have gotten the menu right, but its timing was off. When young consumers came back to the frozen food aisle last year, the company's supply chain wasn't ready. The result: It lost market share to rivals. Jeff Hamilton, who heads Nestle's U.S. food business, said in an interview the company did not have the manufacturing capacity ready to meet extra demand for its Stouffer's Fit Kitchen and Lean Cuisine meals. He described it as "sudden, significant and beyond our expectations."
To catch up, Nestle recently increased capacity at several of its U.S. factories, including making adjustments to its plants and adding a new line in its factory in Jonesboro, Arkansas, Hamilton said.
Investors have long pressed Nestle to improve the performance of its frozen food business, leading the company to bring consultants, focus groups and international chefs to its Ohio research facility to help overhaul its menu. Today, the lineup includes items such Coconut Chickpea Curry and Sweet Earth Veggie Lover's pizza, advertised as organic or high in vitamin C. Yet since September, retailers have sold fewer Nestle frozen entrees than during the same period the prior year, hitting a low point in January when Nestle volumes were about 5 percent down from last year, according to Bernstein analysts who reviewed data from Nielsen.
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