Freezer Frenzy: Frozen Foods Fastest Growing Grocery Segment

So much for organic and slow food. As Ross Boettcher reports in the World-Herald via Brand Amplitude, speed, ease of preparation and cost are driving consumers to the frozen food aisle of the supermarket despite medical warnings about increasing obesity and health. How to explain the equally strong sales growth in the premium foods category? Income levels:

"Plucking a microwave dinner from the freezer section can be a chilly proposition. Just ask Beth Blackburn, who has a frozen meal nearly every day for lunch. On a recent afternoon trip to the grocery store, Blackburn, an administrator in the Nebraska Medical Center's regulatory affairs office, walked up and down the freezer aisle looking for lunch. She spent more than five minutes looking for a single-serve frozen meal, scanning the options, brand by brand. She couldn't decide.

“They give you too many choices,” she said before settling on a box of pizza bites.

The abundance of different brands and choices are a reflection of food manufacturers vying for sales and market share in one of the fastest-growing and most profitable areas of the grocery store: the freezer. Today, more consumers than ever before are turning to frozen foods for a quick, convenient meal, or as an affordable solution to help feed their busy families.

“I like the packaged meals because then I don't have to cut everything into individual servings,” said Pamela Hespien, 57, of Omaha. “I would rather just warm up one meal that's one serving. It's easy. It's convenient.”

On any given night in the United States, about 16 percent of all main dinner entrees come from the grocery freezer case. That's up from 9 percent in 1984, according to the market research firm NPD Group.

Frozen food also is taking up more of the store. The frozen food aisle now often is more than one aisle, with the average length doubling since 1990 to about 400 feet today, according to grocery consulting firm Willard Bishop.

That's because food makers like Omaha-based ConAgra Foods have responded to increased demand by adding things like steamer trays and bags, modern flavor profiles and items that can be marketed as natural or wholesome.

Those kinds of innovations, and the way companies are able to market them, are increasingly important because the frozen food section of the grocery store is second only to dairy in terms of profitability. Those dynamics have created a battle for space in the freezer case that is as fierce as ever, said Jim Hertel, a managing partner at Willard Bishop, a food retail consultant.

“It's a Darwinian part of the store,” Hertel said. “Innovation is at a premium across the store, but the frozen department is really on point right now because there are so many people interested in convenience.”

Most moms would rather cook from scratch but are busier than ever, often balancing jobs with home life, said Stacy DeBroff, chief executive of Mom Central, a Newton, Mass., agency that specializes in marketing to mothers.

Even many women who decide to be stay-at-home mothers do it to spend time with their children, not “to start working on dinner at 4 o'clock,” said Virginia Lee, an analyst with Euromonitor International.”

NPD has tracked a decline in cooking from scratch — from 72 percent of dinner entrees in 1984 to a low of 58 percent in 2007 and 59 percent in 2010.

Cost also has been a factor. American demand for frozen food, which often is cheaper than making a meal from scratch, has grown constantly over the last decade because the average household income hasn't grown, said Harry Balzer, NPD Group's chief industry analyst who has been tracking trends in food consumption since 1984. The frozen food boom grew even more during the recession, a period when ConAgra's sales thrived. But it wasn't a cause of the weakened economy.

“The trend precedes the recession,” he said. “The recession just illuminated it.”

Packaged Facts, a market research firm that follows consumer goods, estimates that retail sales of frozen foods and beverages through all retail channels was about $56 billion in 2010. The figure is projected to near $70 billion by 2015.

According to figures from NPD, vegetables, red meat, pizza and potatoes were the most-often consumed frozen foods last year. The area where ConAgra has its largest stake — single and multi-serve frozen entrees and dinners — is fifth. And nearly a third of Americans ate a packaged frozen meal every two weeks during the 12 months ending February 2010, NPD said.

ConAgra, which sells about 3 million packages of frozen food every day, wants that number to grow, said Corey Berends, ConAgra's vice president of research and development

“We want the [frozen meal] category to grow, and we want more people using frozen foods,” said Berends. “As more innovation comes to the freezer, its going to bring more news and draw more people to the category.” But now, with consumers still pinched by the economy, fewer people have been heading to the grocery store and stocking up on single serve meals. “The category hasn't grown as much as we'd like to see it,” Berends said.

Instead, people are making smaller grocery hauls and purchasing family-oriented offerings that can feed the whole family. A ConAgra competitor, Nestlé, which owns Stouffer's, Lean Cuisine and DiGiorno, is marketing the idea of gathering the family around the table, even citing research on how family dinners can improve children's grades.

In that multi-serve meal category, ConAgra has invested a larger chunk of money on research and marketing in recent years on products like its Marie Callender's bakes. The company views those meals as a place where it can grow sales.

Over the last year, comparing March to March, the company increased sales almost 25 percent in that area to $75.3 million. It also grew its market share from 4.6 percent to 5.3 percent in the $1.46 billion category, according to data from the SymphonyIRI Group, a Chicago-based market research firm.

In another part of the freezer, sales of single-serving frozen dinners as of March 20 had declined 4 percent to $3.48 billion during the last year, SymphonyIRI said.

ConAgra, which owns about 31 percent of that market with brands that include Healthy Choice, Banquet, Marie Callender's and Kid Cuisine, saw its sales decrease at about the same clip as the overall marketplace, but held its own in terms of market share with about $1.07 billion in sales.
Those figures don't include sales from Walmart and Sam's Club, where ConAgra does a good deal of sales, a company spokeswoman said.

The company has had to raise prices because of bloated commodity prices. Now, for example, instead of getting Healthy Choice meals deals like three for $5, consumers will get only two for $5, said Becky Niiya, the ConAgra spokeswoman.

The company also is facing more competition from major competitors that have jumped on the “innovation” bandwagon.

In a recent conference call with industry analysts, Gary Rodkin, ConAgra's chief executive, said having more innovation and increases in marketing dollars directed toward the frozen entree section by competitors like Nestlé and HJ Heinz and Co. is a good thing. In fact, he welcomes it.

“We like when we see that kind of activity in the freezer case because we believe that's a platform that we can compete very well on, and we welcome it,” Rodkin said in response to an analyst question. “That's the right way to compete in this segment, with innovation and product quality and marketing.”

ConAgra's Berends said grocery shoppers should expect foods in the freezer to keep changing. More meals in the Healthy Choice and Marie Callender's brands will be cooked with steam, and new packaging will be applied to more meals in ConAgra's frozen portfolio, “where it's appropriate,” Berends said.

ConAgra and its competitors also are striving to gear their products toward nutrition-minded consumers. In the last year, ConAgra like many other food giants, pledged to reduce sodium in its food by 20 percent by 2015. Nestlé, which last year acquired Kraft's frozen pizza business, is working to introduce healthier pizza options.

By improving the nutrition of their foods, foodmakers are expanding the customer pool that would consider purchasing their products.

“It's going to continue to be a slow, steady, structural movement towards using more frozen food,” Balzer, the NPD analyst, said. “We are using more and more frozen foods not just because of the recession, but because it's easy.”