Ice Breakers

2/1/2013

As sales of frozen products remain flat, innovations roll out to heat up freezer shelves.

Since the advent of the icebox, frozen food has provided consumers with a way to enjoy quick, convenient meals at the turn of a knob or the push of a button. As competition for the already stretched food dollar heats up, frozen food manufacturers are delving anew into R&D to avoid any additional warming.

Actually, "frozen" is a word that defines the state of the category as much as its nature. According to the latest market research, the frozen food category isn't expanding as rapidly as others, but isn't drastically dropping off, either. Frozen, in this case, connotes flat.

According to a special report on 2012 trends from Chicago-based Symphony Consulting (a business group of SymphonyIRI Group Inc.), value sales of frozen food, including meals, pizza and soup, rose a scant 0.3 percent in 2012.

In its review of frozen meals, meanwhile, Chicago-based market research firm Mintel predicts that frozen food will likely stay the same or, at best, grow nominally, through 2016, an ongoing trend attributed to consumers' penchant for dining away from home.

In addition to competition from foodservice, the frozen food aisle has some solid competition within the store, as shoppers seek out items in perishable areas, including produce, bakery and deli/prepared foods. In its report, Mintel pointed out that the prepared foods of today's supermarkets are akin to restaurant meals, but available at a lesser cost, and thereby may put a damper on frozen meals a few aisles over.

Moreover, beyond inter-industry competition, intra-category competition tightens the marketplace. The sheer size of the frozen food section, with so many SKUs across different subcategories, may translate to smaller gains among individual products or product lines.

There are other barriers to growth within the category as well. One of them relates to the perceived healthfulness and wholesomeness of frozen foods, especially when compared with fresh offerings. Mintel reported that only 38 percent of consumers consider frozen meals a healthy option. Add to that growing consumer interest in preparing meals from scratch (or at least partly from scratch), and the result is a category that's looking to innovation across product, packaging and promotion to prevent any further deep freeze.

While the overall frozen food category is caught somewhere between decline and growth, with various challenges in the way of healthy sustained growth, there are variations within subcategories. For example, breakfast foods that start the day may kick-start the general market for frozen food, thanks to a reported growth of nearly 5 percent.

As a subcategory, frozen appetizers were also in the black by SymphonyIRI's measure, rising slightly at just over 2 percent over the previous year. The ice cream/sherbet and frozen novelty subcategories edged up a bit, too. Comparatively, general frozen dinners/entrées, pizza and desserts/toppings all slid, but at modest levels of between 1 percent and 3 percent.

John N. Frank, manager of food and drink reports for Mintel, affirms those trends. "We had four different frozen reports we did last year, and things were flat for frozen meals," he says. "They have had some problems, but other segments have done a bit better, like breakfast foods and snacks."

In this competitive environment, it's no surprise that new product development has been in overdrive within the frozen food category, as companies try to bring shoppers into the cold. According to Mintel, more than three-fourths (78.8 percent) of the 2,300 or so new product introductions in frozen/refrigerated meals are frozen products, compared with 21.3 percent in refrigerated meals. 2012 was a particularly busy year for launches.

"I think the pattern is similar to what it's been in the past," Frank notes. "Companies cut down on new products during the worst of a recession and realize that they may lose ground without innovations, and then come back."

$ 2.8 billion in frozen breakfast food category sales, a 5 percent increase

Source: SymphonyIRI

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