Overall frozen food sales have been more or less flat in recent years, with 2012’s estimated $44 billion in sales across U.S. retail channels representing a slim 0.4% gain over 2011, according to a new study from research publisher Packaged Facts.
The category’s dollar sales grew by just 7.7% between 2008 and 2012, a compound annual growth rate (CAGR) of 1.9%, according to the report, “Frozen Foods in the U.S.”
SymphonyIRI food/mass/drug retail channels (excluding Walmart) data for the 52 weeks ended June 10, 2012 showed total-category dollar sales up just 0.3%, to $26.2 billion, with center-plate sales (the largest classification) down 0.6%, and other classifications showing modest gains ranging from 1.1% for vegetables, appetizers/snacks and sides to 4% for desserts. But all four classifications experienced unit/volume declines, and total-category volume declines 5.1% -- meaning that much of the dollar growth was driven by inflation and price increases, rather than unit growth, points out the report.
Further, over the next five years, Package Facts projects total-category CAGR of just 2%.
Numerous factors have been contributing to the stagnation, including slow economic recovery; changing consumer eating patterns, shopping patterns and demographics; lack of excitement in frozen foods categories and merchandising; retailers’ increased focus on the fresh-foods perimeter areas of their stores, to the detriment of frozen foods and other center-store categories; and competition from fresh foods (including prepared fresh foods), shelf-stable foods, and restaurants.
Consumers’ growing preference for fresh foods is the core challenge. According to an August 2012 national online survey by Packaged Facts, a preference for fresh foods is the top reason (57%) shoppers cite for not buying frozen foods in the last three months, followed by a preference for home-cooked foods (35%).
In contrast, fewer than one in five shoppers say that they have not bought frozen foods because they don’t like the taste, don’t have enough freezer space at home, are not confident in frozen foods’ nutrition, or are not confident in frozen foods’ quality. (The last concern is notably more prevalent among women, however.)
Opportunities and Strategies
In the face of these challenges, frozen food marketers are adapting their strategies to focus on areas of opportunity.
Major frozen food makers including ConAgra, Heinz and Unilever are refocusing their brand portfolios – in some cases selling off units, while in others acquiring businesses/brands to either enter or strengthen their positions in faster-growing classifications, points out the report.
In just one of many recent examples, ConAgra in August 2012 acquired the licenses for the Bertolli and P.F. Chang’s Home Menu frozen meals businesses from Unilever PLC – businesses that are leaders in the frozen multi-serve meals segment, with nearly $300 million in annual sales.
At the same time, frozen food marketers are increasingly squaring off directly against fresh foods with “fresh” positioning – for example, citing research that demonstrates that frozen produce is as nutritious (in some cases even more nutritious) than fresh produce, notes Packaged Facts publisher David Sprinkle.
Visible examples include Pinnacle Foods’ Birds Eye Steamfresh line of steamable vegetables and side dishes, and ConAgra’s Healthy Choice Steaming Entrées (packed in clear plastic trays to show off the colorful, “frozen-at-the-peak-of-freshness” vegetables, with “fresh taste,” inside).
Makers are of course also offering a rapidly growing number of new product lines, sub-brands and varieties that meet consumer demand for lower fat, lower calories and other healthier profiles, as well as dietary needs or preferences such as gluten-free and vegetarian. In addition, “better-for-you” reformulations of existing products are increasingly common, points out the report.
As supermarket and other retail chains aggressively expand their premium (as well as “value”) private-label offerings, frozen food brands, like other categories, will have to work even harder to focus their portfolios, differentiate themselves and woo new and growing customer segments, as well as those (like families with children) already more likely to buy frozen foods.
Private label already accounts for about 20% of all frozen food sales, per SymphonyIRI. And although brands still heavily dominate sales of some classifications (notably, frozen single-serve dinners and entrées), a growing number of retailers are pushing their private-label programs beyond the more “generic” categories like frozen fruit and vegetables, where private-label penetration is currently highest, reports Packaged Facts.