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Elevated Frozen Food Sales Reveal Inflation in Some Categories

Demand remains elevated, but dollar growth outpaces volume
Photograph: Shutterstock

While the country is slowly starting to reopen businesses and restaurants, grocery retailing sales continue to track well ahead of the old baseline. The week of May 17 was free of influences from holidays and may be a good indication of how far the new everyday demand sits above the old normal. Amid the many changes in grocery shopping patterns, there has been one constant: Consumers are increasingly relying on frozen foods. Since the onset of coronavirus in the U.S., the frozen food department has been among the top performers. 210 Analytics, IRI and the American Frozen Food Institute (AFFI) partnered to understand the effect for frozen food in dollars and units throughout the pandemic.

Dollar gains for frozen foods for the week ending May 17 were up 30.9% over the same week in 2019. This is the third week in a row with gains in the low thirties and perhaps the start of a pattern. In other areas of the store, the meat department had another strong week, but overall perimeter performance was pulled down by continued struggles in deli prepared and in-store bakery that have seen sales losses each week since the end of March. Center store edibles increased 21.5%, making frozen foods once more a sales leader.

Dollar Growth vs. Comparable Week in 2019

Source: IRI, total U.S., multioutlet, one week percent growth vs. year ago

Frozen foods generated nearly $1.3 billion in the week of May 17—$304 million more than the comparable week in 2019. Supply chain issues combined with the highly elevated consumer demand drove continued out-of-stocks at some stores. On the Retail Feedback Group’s Constant Customer Feedback (CCF) program, a shopper wrote, “More out-of-stocks this trip on assorted frozen vegetables, frozen broccoli, frozen peas.” Another wrote, “Broccoli florets in the frozen section were out. Honestly, I understand that it may not be possible to find certain items on any given day.”

IRI’s measure reflecting assortment variety shows an uptick in the average number of frozen food items available per store during the two panic buying weeks ending March 15 and March 22. But ever since, the number of items vs. the same week in 2019 has been down. Given that consumer demand is up, the smaller assortment is likely directly due to supply chain issues and SKU rationalization decisions to optimize productivity.

Assortment variety was down 5.9% for the week ending May 17 vs. the same week in 2019. This reflects the lowest levels of variety seen since the onset of the pandemic and reflects 85 fewer items per store on average than the same week last year.

Some of the hardest-hit areas included the following, with assortment levels down from the prior week for all:

  • Frozen fruit: -13.5%
  • Prepared vegetables: -13.5%
  • Frozen entrees: -12.9%
  • Frozen pizza: -15.7%

One of the very few areas with an increase in the average number of items per store was frozen meat (up 6.1%). The tight supply in the meat department means inventory is far below normal levels and many meat buyers have ramped up their frozen meat inventory to supplement fresh assortment, where possible.

Supply chain issues are also felt in inflationary pressure in several categories, including meat. While volume sales measures are not available for all areas, several subcategories are starting to see a significant gap between dollar gains and volume gains—pointing to price increases. For meat, dollars tracked more than 14 percentage points ahead of volume, signaling significant price increases. All frozen food areas had higher dollar than volume gains during the week of May 17 vs. the same week in 2019. A shopper commented, “Each time I go to the store it seems the grocery bill is higher. Even frozen food that is normally a cheaper option than fresh seems to cost more. Hopefully prices will come back down once things get back to normal.”

Unit sales saw robust increases over the week of May 17 vs. year ago as well. In many cases, volume gains outpaced unit gains, which points to consumers opting for larger pack sizes.

A Deep Dive Into Frozen Food Sales

The overall 30.9% gains were supported by double-digit increases for all areas of frozen food. The highest gains were achieved by frozen meat, poultry and seafood, at 50.8%. This translated into $423 million in frozen animal protein sales the week of May 17, an additional $143 million vs. the same week last year. The largest share within frozen foods—frozen meals—increased more than 18% despite stores carrying many fewer items. Frozen pizza, which had nearly 16% fewer items on average per store selling, increased sales 27.7% over the week ending May 17 vs. the comparable week in 2019.

What’s Next?

Frozen foods have generated double-digit gains for 10 out of the past 10 weeks and seems to be holding steady at highly elevated levels compared with last year’s sales. The next sales report, covering week 11 of coronavirus’ affected shopping patterns, is the week of Memorial Day weekend. As the unofficial start of grilling season, this is often a big week for grocery retailing.

IRI found that one-third of Americans had different plans than in 2019, with 19% saying they would not be hosting or attending get-togethers and 13% foregoing trips that they undertook in prior years. It is likely that just as seen with Easter and Mother’s Day, people celebrated the holiday but celebrated in different ways.

Meanwhile, the relaxation of the stay-at-home executive orders looks different from state to state and encompasses everything from the partial reopening of dine-in restaurants to the opening of hair salons and gyms to merely shifting from stay-at-home to safer-at-home. As states begin to enter their various reopening phases, the economic and social readiness of consumers to reengage with foodservice will become clearer. For the foreseeable future, it is likely that grocery retailing will continue to capture an above-average share of the food dollar with frozen food in a starring role.

Anne-Marie Roerink is principal of 210 Analytics, which specializes in research for the food retailing industry and authors studies in meat, produce, bakery, deli, frozen, confectionery, snacks and retail operations. She can be reached at aroerink@210analytics.com.

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