• by Karlene Lukovitz  @KLmarketdaily, April 10, 2009

Frozen foods as a whole saw outstanding sales growth last year -- up 6.5% to $51.8 billion -- and are expected to see annual compound growth of 4.6% between this year and 2013, or 25.2% overall growth, to reach $64.8 billion, according to Packaged Facts' new "Frozen Foods in the U.S." report. 

Not bad for an extremely mature category in which even a 1% gain equates to more than $600 million in retail sales.

Sales of frozen F&B products tracked by IRI InfoScan data rose 3.2% for the 52 weeks ending Nov. 2, 2008 (to $31.7 billion), the highest annual increase in the past five years, PF reports. Furthermore, IRI shows 11% growth for the category between 2004 and 2008, for a CAGR of 2.6%.

Within this larger picture, frozen breakfast foods are the standout, showing an impressive '04-'08 growth rate of 21.9% and a CAGR of 5.1%, per IRI.

At the other end of the spectrum, frozen beverages declined by 15.4% during the five years, for a CAGR of -4.1% -- again per IRI data.

Looking forward, PF projects the strongest cumulative five-year (through 2013) growth for the breakfast and vegetables/appetizers/snacks/sides classifications: 6.8% and 6.5%, respectively.

Frozen breakfast foods still represented just 4.6% of total frozen sales last year, but that's up from 4.2% in 2004, according to PF. During the same period, beverages' share of category declined from 1.8% to 1.4%.

Meanwhile, "center plate" or entrées grew share from 48.3% to 50.2%, and vegetables/appetizers/snacks/sides grew share from 16.3% to 16.9%. Aside from beverages, only desserts showed a declining piece of the frozen pie: down from 29.4% to 26.9%.

The factors driving frozen F&B sales are no mystery. Part of the equation is a moderate increase in at-home meal preparation and consumption: NPD Group's CREST/National Eating Trends data show consumers preparing/eating 871 meals at home on average last year, versus 868 in 2007.

Convenience continues to be the bigger driver. Americans spend 30 minutes or less cooking dinner, according to NPD, and frozen foods offer portability, quick preparation and easy cleanup. Combined with a growing desire for healthier diets, frozen foods that are "better for you" alternatives -- and particularly those offering super-easy packaging/preparation formats (such as single-serve pouches, portionable packs and servings for two) are particularly well-positioned for growth, PF's analysts point out.

Health and weight control concerns are, conversely, contributing to downtrends for frozen desserts and higher-calorie frozen beverages such as frozen cocktail mix concentrates and coffee creamers.

The current baby boom is another important overall frozen growth-driver, as frozen foods represent an easy solution for kids and teens preparing their own quick breakfasts and snacks, PF adds.

Competition within frozen is, of course, more intense than ever. While certain brands continue to heavily dominate specific classifications -- 36% of U.S. households use Ore-Ida frozen potatoes, 35% use Eggo waffles, over 25% use Stouffer's and Lean Cuisine dinners and frozen main courses, and 27% use Green Giant frozen vegetables, for instance -- the "vast majority" of brands have household penetration under 5%, according to PF.

The competition will not get any easier: 624 new frozen foods (including both single SKU's and multiple SKU lines) were launched last year, per Datamonitor's Product Launch Analytics. In addition, the dominant multinationals face growing competition from niche and natural/organic frozen food makers -- and all branded makers are being affected by private-label offerings to some degree, particularly in the current economy.

Private-label represented 18% of frozen food dollar sales for the 52 weeks ending Sept. 7, 2008, a 1.2% gain over the same previous-year period, per IRI. PF's analysis shows that private-label was by far the strongest in the frozen plain vegetables category (with a market share exceeding 40%), and weakest in frozen handheld breakfast entrées (just 1% share).