Stars Align for Frozen Foods to Rise

Better-for-you foods have hit the frozen food aisle. And that’s good news for a center store category that’s been taking a back seat to fresh products.

A recent Packaged Facts report (Frozen Foods in the U.S.: Hot Meals, Sides, and Snacks, 6th Edition) found frozen foods losing ground to their shelf-stable and refrigerated/fresh counterparts from 2014 to 2016, even though frozen foods are considered the most affordable and most convenient among packaged food products consumed as hot meals.

The good news: The frozen foods category has a 99% household penetration, and innovation—in the form of new flavors and better-for-you formulations—is boosting sales.

“The market is being strengthened by robust investment in product innovation, which includes developing bold and unique flavors, varieties inspired by world cuisines, product offerings that accommodate special dietary concerns, and products with cleaner labels and healthier nutrition profiles,” the report says.

Industry data paints a detailed picture of what’s been happening in the frozen food space.

“In general, for the last several years, this large category of $7 billion has fluctuated in the range of flat to 1% in dollar growth,” says Don Catalfu, division VP for Nestle Food Division.

For the calendar year 2017, he says, “The frozen prepared meals category, as tracked by Nielsen, posted category dollar growth of 0.9%, while units were down 1.7%.” However, underperforming segments and bright spots exist within the category.

“Category unit decline for 2017 was driven mainly by single-serve economy/value brands, down 5.5%,” says Catalfu. “The bright spots for 2017 revolve around better-for-you single-serve premium brands driven by new users that are finding increased category relevance through the expansion of modern health benefits such as plant-based proteins, organics, gluten-free and more authentic global recipes.”

The relatively newfound intersection of convenience and healthier profiles is further fueling category growth.

“Although consumers are more focused on cooking at home and consuming less processed foods, there is still a demand for convenience,” says Linda Zink, SVP of innovation for Atkins Nutritionals Inc. Frozen meals typically have met the demand for convenience, she adds, but have generally ignored the call for better-for-you ingredients.

However, there are changes afoot that are benefiting manufacturers and retailers alike.

“Every retailer we have engaged with has said that their organic and natural offerings in frozen are a source of growth versus the remainder of their frozen sets,” says David Perkins, founder of Beetnik.

According to The Future of Frozen, an October 2017 report from Acosta, 26% of total U.S. grocery shoppers reported shopping the frozen foods department more frequently during the previous year, with millennials leading the way.

Forty-three percent of millennials reported buying more frozen food items, followed by Gen Xers (27%), baby boomers (19%) and silents (19%). The attributes those shoppers ranked as most important in making purchasing decisions were no antibiotics (76%), hormone-free (76%), all-natural (73%), sustainable (71%) and low-sodium (69%), the report says.

Savvy manufacturers are taking customers’ interests to heart by addressing what Margot Gunther, marketing manager of Dr. Schar USA Inc., calls “barriers to purchase.” Products that are high-protein, low-calorie and low-fat, as well as those that address specific dietary needs such as gluten-free, dairy-free and vegan, are helping overcome those barriers, Gunther says.

Examples of innovative frozen food options include Atkins’ preservative-free, protein-rich, low-carb meals; Beetnik’s USDA Certified Organic Moroccan Seasoned Chicken Stew, Peruvian Seasoned Chicken Stew, Thai Style Grass Fed Beef with Coconut Rice, and Organic Honey Chicken with Zucchini Noodles; Dr. Schar’s Fusilli with Arrabbiata Sauce, Caserecce Pasta with Pesto Sauce, and Cannelloni with Ricotta and Spinach, plus cheese and veggie gluten-free pizzas; Kidfresh’s preservative-free Mac n Cheese and Chicken Nuggets made with “hidden” vegetables; Schwan’s Freschetta Kitchen Fresh Pizzas (one gluten-free, one with whole-grain crust); and Nestle’s Stouffer’s Fit Kitchen protein-packed dishes that are grilled or oven-roasted and include herbs instead of oil for seasoning.

As category options expand, retailers must give health-conscious shoppers reasons to travel the frozen food aisle more frequently. Educating consumers about the benefits frozen foods deliver is an important step, says Matt Cohen, CEO and co-founder of Kidfresh. “Frozen is one of the best ways to preserve nutrients and flavors while extending the shelf life of food.”

Minimizing food waste is another benefit of frozen foods, Perkins of Beetnik says. “The strong advantage of frozen products is that consumers don’t end up throwing out product if their life plans change,” he says. “Food waste is an issue for millennial and Gen X consumers who want great taste [and] convenience, and who also care about reducing food waste.”

Winning customers back to the frozen food aisle can be as simple as offering easy menu solutions to time-starved customers, says Karen Wilder, senior director of health and wellness for Schwan’s Co. Other approaches she suggests: sampling products (a simple cheese pizza dressed up with grilled vegetables, for example); putting a freezer in the deli or near the produce section to inspire customers to select salad greens to boost the nutritional value of a meal; and using endcap freezers to promote special offers.

Targeting very specific groups of shoppers is another option. For example, Cohen says he has seen some retailers create a frozen foods destination that appeals to parents by building doors targeted specifically to kids.

There is also another aspect to frozen foods that retailers sometimes overlook—but one that is of tremendous importance in this age of e-commerce.

“Frozen foods are one of the few categories that is still more frequently purchased in-store than online, so these items just might be the key to drawing shoppers from the perimeter into center store,” says Colin Stewart, SVP of Acosta.