• by Karlene Lukovitz  @KLmarketdaily, May 11, 2007

Breakfast meats enjoyed sizzling sales during the mid-2000's low-carb diet craze, but their growth now depends on product innovations offering greater convenience, single-serve options, and healthier versions.

According to IRI, overall breakfast meat sales were flat during the past 52 weeks, at $2.85 billion, and sales for both the sausage/bacon subcategory ($856.9 million) and refrigerated bacon subcategory ($1.99 billion) were each down by under 1%.

Private-label refrigerated sausages/ham are clearly giving the brands a run for their money--their sales jumped 9.7% to $69.6 million during the period. But Jimmy Dean's traditional refrigerated sausage/ham products performed well--gaining 8.8%, to $168.2 million, and grabbing a 19.6% share of that segment for the period.

And the real action is on the convenience front. According to senior brand manager Tim Smith, between a third and a half of Jimmy Dean's overall 15% brand sales growth for fiscal 2006 was driven by Jimmy Dean Breakfast Skillets--packages of pre-diced breakfast meats, vegetables, potatoes and other ingredients that can be thrown in a skillet along with fresh eggs and prepared in 10 minutes.

The Skillets introduction is one clear indicator that parent Sara Lee--now about two years into an ambitious restructuring plan and an aggressive focus on "disciplined innovation" driven by its new, multimillion-dollar research facility outside of Chicago--is very much on top of the shifting trends affecting the breakfast meats category.

Case in point: Skillets is marketed as a "weekend-style breakfast for any day of the week"--clearly reflecting the reality that while 75% of U.S. households consume sausage, only 26% report doing so on weekdays, versus 47% on weekends, when preparation time is less of an issue, according to an April 2007 study on the breakfast/lunch meats category from Mintel International.

The concept seems to be hitting the bull's eye: Nearly half of consumers who eat breakfast meats now report consuming these in the form of packaged, pre-made breakfast meals or in breakfast sandwiches. Sandwiches are also a growing business for Sara Lee, along with heat-and-serve bagged sausages and omelets, and the kid-oriented Pancakes & Sausage Stick.

Healthier versions of meats, including lower-fat and turkey versions, are also becoming more important. While a third of breakfast eaters consider protein content when making their meal selections, over 40% are concerned about fat content--a significant downside for sausages.

The rapid growth of one- and two-adult households--up 21% and 17%, respectively, between 1995 and 2005, and now accounting for nearly 60% of all U.S. households--is driving a wider variety of single-serve and portion-controlled packages.

But quick preparation and portability represent by far the biggest growth opportunities. Regardless of family size, frozen sausage consumption is rising for products that allow consumers to readily consume just the amount needed, according to Mintel.

Sara Lee's most recent breakfast convenience innovation, Jimmy Dean Breakfast Bowls, neatly tie into all of these trends. These prepared medleys already include scrambled eggs or pancakes, take just 3 minutes in the microwave, and eliminate dirty dishes.

Sales since their launch last July have exceeded expectations by more than 100%, forcing the company to increase production capacity to keep up with demand, reports Smith. The product has passed Sara Lee's core success metrics with flying colors, he adds: It's creating new, incremental customers for the company, and it's bringing incremental customers to the category for retailers.

Smith says that more new convenience products will be launched within the next few months, although he would not reveal specifics.

Sara Lee is the leader in the total U.S. breakfast protein sector, and the second-largest player in the breakfast/sandwich meat category, with a 15% share, versus Kraft's 18.8% share, according to Mintel.

Mintel estimates Sara Lee's 2006 overall breakfast/lunch category sales at $1.4 billion, down 5% from 2004. However, Jimmy Dean increased its dollar share by 1.3 points, to 46.9%, during its just-ended fiscal 07 third quarter, and Sara Lee's net North American retail meat sales rose 6.2% during the period, to $645 million.

The category is going to need all of the innovations it can come up with in the years ahead. After seeing lifts of 5.6% and 2.4% in 2003 and 2004 during the peak of the low-carb trend, breakfast sausage/ham sales fell by 3.8% and 2.6% in 2005 and 2006, putting them at $852 million last year, reports Mintel.

Sales are projected to grow by under 1% per year in current price terms--and decline by between 2 and 3% in constant price terms--between 2006 and 2011.