During the American Frozen Food Institute (AFFI) Leadership Conference last week, over 70 member companies gathered to identify pockets of growth and to better understand demand drivers in an era of intense competition and disruption. Sally Lyons Wyatt, IRI executive vice president and practice leader, kicked off the conference to share future growth potential for frozen foods. While frozen food gains have outpaced total food and beverage growth over the past five years, how to sustain this strength is top-of-mind for frozen food manufacturers.
| Frozen foods dollar sales | 2017-2020 Compound Annual Growth Rate |
| Total omnichannel | +9% |
| Total brick and mortar | +9% |
| Total e-commerce | +69% |
Lyons Wyatt shared that frozen food continues to benefit from engaging with the new buyers gained in 2020, particularly among lower-income and younger households. For instance, frozen food dollar sales among lower income Millennial households are up 15 percent. An opportunity for 2022 is renewed engagement with upper-income households.
Year-to-date, frozen food dollar sales remain strong, up 22.6 percent versus the 2019 pre-pandemic normal, per IRI. Additionally, price increases for frozen foods have been more modest than total food and beverages. This should further benefit frozen food as inflation is ramping up quickly across the store. Additionally, sales measures are affected by supply chain woes, reflecting SKU compression, out-of-stocks and low in-stock rates for items that are available.
Lyons Wyatt summed up the future of frozen into three key drivers that will add additional value to low-, middle- and upper-income consumers alike:
Convenience
In the third quarter of 2021, COVID-19 cases started to surge once more — interrupting the multi-month normalization of grocery shopping patterns. Supply chain woes, high inflation and slow(er) wage growth are testing consumers’ ability and willingness to pay more for their groceries and eating out. This has pushed more dollars back to retail in recent months, in particular to frozen foods.
At the same time, Americans are tired of scratch cooking. Categories within frozen food with an above-average performance are breakfast, dinners/entrees and appetizers — all focused on delivering convenient, nutritious solutions across meal occasions.
Sustainability
Beyond convenience, sustainability is an important area of shared values between frozen food and consumers. Benefiting from much longer shelf life than its fresh counterparts, waste is minimal in the store and at home. But sustainable benefits for frozen foods rise far beyond waste. Advances in vertical farming, precision agriculture and artificial intelligence are improving variety and delivering sustainability benefits. Technological advances in processing also deliver sustainable benefits, without compromising taste, texture or nutrients. An example is isochoric freezing, a more energy efficient way of food preservation that reduces carbon emissions. Frozen food is also an innovation haven for plant-based solutions and alternative proteins — a sought after area among consumers, particularly Millennials.
Frozen sustainably-positioned foods are driving above-average growth and many have been able to command a price premium. A few examples are as follows.
| Frozen food claim | % change vs. 2020 | % change vs. 2019 |
| Eco-friendly | +20.1% | +91.4% |
| Free range | +14.5% | +28.6% |
| Farm-raised | +10.4% | +53.9% |
| Reusable packaging | +10.2% | +25.7% |
Personalization
Frozen food has an opportunity for an enhanced, personalized consumer experience. Examples are lifestyle diet product attributes or better shopping experiences, particularly online. Seven in 10 consumers feel frustrated when an online shopping experience is impersonal. Retailers and frozen food manufacturers can leverage technology to make product recommendations, provide nutritional information and meal suggestions. Top areas of personalization are natural and clean label options, a mix of healthy and indulgent options, lifestyle trend foods (Keto, gluten-free, etc.) and authentic ethnic foods. With lifestyle diets continuing to thrive, noting functional benefits versus other ingredients will become more prominent.
Investing in personalization to build better relationships and create better experiences pays off. Companies using advanced personalization report a $20 return for every $1 spent, according to IRI.
Future of Frozen
Looking ahead, convenience, sustainability and personalization all provide retailers and frozen food manufacturers with opportunities for sustained growth. IRI’s Sally Lyons Wyatt will deliver her state of the frozen food industry, with a deep dive on frozen produce, during AFFI’s Frozen Food Convention (AFFI-CON) in Dallas on February 21, 2022.
Anne-Marie Roerink of 210 Analytics also contributed to this article.
