Op2: Even in a downturn, customers are willing to pay a premium price for convenience; people who traded up during the boom may not be so fast to trade down

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After cranking out growing numbers of premium-price just-add-meat dinner kits to cater to busy families during the boom, food marketers are cranking out even more as the economy slows.

How can the same category thrive in good times and bad? Unilever's Lipton and Campbell Soup Co. are banking that convenience will be just as important to consumers in a softer economy, and that a slowing economy could even help in a sort of reversal of the mid-1990s "home meal replacement" craze if more consumers eat at home.

The once-sleepy category has been a hotbed of activity in recent years, thanks to entries from Philip Morris Cos.' Kraft Foods, with Stove Top Oven Classics, and Lipton Sizzle and Stir.

Even with sales up 8.4% to $264.6 million, General Mills' Betty Crocker Hamburger Helper lost share to Sizzle and Stir, with sales of $35 million during its first year, and Stove Top, with sales up 13.2% to $61.8 million in the 52 weeks ended March 25. Now, Campbell and ConAgra Foods are getting into dinner kits, too, with summer launches of Campbell Supper Bakes and Banquet Homestyle Bakes, respectively. Unlike Hamburger Helper, with its blue-collar heritage and average price under $1.80, the new generation of kits aim more upscale, with prices ranging from $2.60 to $2.99.

Meals with Lipton Sizzle and Stir aren't cheap, at least compared to scratch cooking. Alicia Rockmore, marketing director for Lipton and Knorr brands at Unilever, estimates it costs a family of four $10, including the meat and side items, to prepare a meal using the brand. But dinner kits are a small luxury.

"Where I think we will benefit [from a slowing economy] is that consumers are going to turn to home for meal options as opposed to necessarily always getting in the car to go to the fast food place or going out to dinner."

Work on Supper Bakes began well before anyone could have forecast a slowdown, a Campbell spokesman said. But the economy won't likely hurt, either, he said. "The conventional wisdom is that when the economy is slow, people stay home and they eat."

The economy's impact on food generally remains unclear. In a report last month, Salomon Smith Barney analyst Romitha Mally noted food category volumes were up 4% to 5% in the first quarter, well ahead of the traditional 2% to 3% rise, and said consumers switching to home cooking may be a factor. But Andrew Lazar, analyst with Lehman Brothers, notes that Y2K-related pantry-loading at the end of 1999 depressed food sales in early 2000, creating favorable comparisons this year.

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