Although grocery purchasing remained stable during the recession, even as restaurant dining declined, frozen foods' growth rate has been declining for five years -- largely as a result of increased competition from fresh prepared foods in grocery outlets.
Many frozen categories and products have been negatively affected by the continually growing variety of fresh prepared foods offered by food retailers (who have more to gain from these than from the limited frozen private-label segment) -- as well as by consumers' perception that frozen products are less fresh, more expensive alternatives to cooking from scratch, points out Packaged Facts.
Pizza and hand-held breakfast items have shown strong growth by offering products with the same quality as quick-serve or convenience restaurant foods and positioning them as lower-cost alternatives to dining out, the analysts note. Prepared vegetables have succeeded largely because of the freshness now possible through steaming techniques.
The intense competition from fresh prepared foods will continue, and Packaged Facts projects just 2% annual growth for frozen convenience food over the next five years (cumulative growth of 10.4%), for annual retail sales of $18.6 billion in 2015. The currently growing frozen categories -- and other categories and products that emulate their successful positioning -- will drive that growth, concludes the report, which confirms that Nestle, ConAgra and Kraft collectively own nearly half of the frozen foods market.
"While we do not anticipate substantial overall growth, we do expect some segments and individual marketers to grow considerably over the next five years" because of opportunities in specific frozen segments and retail segments, sums up Packaged Facts publisher Don Montuori.
Frozen food makers are pushing hard to attract consumers by responding to their growing interest in ethnic and world cuisines and specialized needs, such as gluten-free. (While the growth of frozen product launches has moderated since the recession, they are still numbering nearly 200 annually.) Frozen foods' ability to use their packaging as "canvases" to market their nutritional and health benefits also represent an advantage over fresh-prepared and convenience restaurant foods, note Packaged Facts' analysts.
Single-serve dinners and entrées continue to be the largest frozen category by total sales, but pizza holds second place (two-thirds of households purchase frozen pizzas), followed by hand-held non-breakfast entrées, multi-serve dinners/entrées, appetizers/snack rolls, breakfast entrées, hand-held breakfast entrées, pot pies, and prepared vegetables, according to SymphonyIRI sales data for the 52 weeks ending July 11, 2010. Collective sales for these categories were essentially flat, in percentage terms versus the same 52-week period, previous year.
However, single-serve dinners/entrées' share dropped nearly two points to 30%, while pizza's share picked up more than a point to reach 28% -- large shifts within a 52-week period, Packaged Facts' analysts stress. Single-serve dinners had a 37% share in 2002, and have been on the decline since, while pizza's share had hovered at about 25% for most of the 2000's, they report.
While supermarkets and traditional grocery stores still account for nearly two-thirds of frozen food sales, these formats lost 5 share points between 2007 and 2010, while supercenters and mass merchants gained three points and now have about a 20% share, according to the report. Secondary outlets include warehouse clubs at 7%, and convenience stores at 5%.
The share shifting is the result of aggressive inroads into food retailing not only by Walmart, but by Target, BJ's and others, combined with consumers' tendency to stock up on long-lived frozen foods at attractive prices at supercenters and wholesale clubs, Packaged Facts points out.