Marketers of frozen convenience food have found themselves caught between a rock and a hard place during the economic downturn. Though fresh convenience food has gained through positioning that casts it as a less expensive alternative to restaurant food during a time of recession, frozen convenience food is frequently viewed as a more expensive, less fresh alternative to cooking from scratch at home. The frozen food categories that have been able to grow substantially in this environment are therefore the ones that have been able to elude this paradigm.
Specifically, the mammoth frozen pizza category and the spunky hand-held breakfast category have both found a way to go head-to-head with restaurants; and the prepared vegetable category has been able to triumph on the freshness front via the development of steaming techniques. According to Packaged Facts, these three categories have led the way sales-wise, enabling an otherwise ambivalent market for frozen convenience foods to grow by a modest 2.0% in 2010 to reach sales of $16.8 billion. Packaged Facts expects that marketers in other categories will soon adopt similar strategies, driving sales of fresh convenience foods up another 10% by 2015, to $18.6 billion.
Fully updated from the 2007 edition, Frozen Convenience Foods in the U.S. offers a comprehensive look at this complex market in the context of how it competes with the parallel fresh convenience food market, restaurant takeout, and meals prepared from scratch by consumers. It contains in-depth analysis of Internet marketing, including detailed accounts of marketing on social networking sites like Facebook. The report also details the complex changes that have taken place in the market since the previous edition, with new attention to competition by retail sector, including supermarkets, supercenters/mass merchandisers, warehouse clubs, small marts and Internet.
Using SymphonyIRI mass-market sales tracking data, the report offers detailed accounts of sales and marketer/brand activity across nine product categories: Single-Serve Dinners/Entrees, Pizza, Hand-Held Non-Breakfast Entrees, Multi-Serve Dinners/Entrees, Appetizers/Snack Rolls, Hand-Held Breakfast Entrees, Breakfast Entrees, Prepared Vegetables, and Pot Pies. Relying largely on Product Launch Analytics from Datamonitor, the report also examines new product and marketing trends industry-wide. A special feature of this report is custom survey data by Packaged Facts specifically addressing consumer purchasing of frozen prepared foods, including vis-à-vis the down economy, restaurant dining and takeout, and fresh convenience food. Additional demographic, psychographic, and product penetration analysis derives from consumer data compiled by Experian Simmons, New York, NY.
Market Insights: A Selection From The Report
Supermarkets the No. 1 Retail Channel
Frozen convenience foods are sold through a broad spectrum of retail channels including supermarkets and grocery stores (which include small marts and health/natural food stores); supercenters and mass merchandisers; warehouse clubs; health and natural food stores; convenience stores; drugstores; ethnic markets; and other retail outlets. Packaged Facts estimates that supermarkets and grocery stores lead the market, accounting for 64% of total retail dollar sales in 2010, followed by supercenters and mass merchandisers at 20%. Secondary outlets include warehouse clubs at 7% and convenience stores at 5%.
The difference between 2007 and 2010 share by retail channels is basically a shift away from supermarkets (which lost 5 share points) towards supercenters and mass merchandisers (which picked up 3 points) and to a lesser extent warehouse clubs (which gained 1 point). This is due to the aggressive inroads into food sales of the likes of Walmart, Target and BJ’s Wholesale Club, interacting with the recessionary cost-cutting environment and supplemented by frozen food’s long shelf life. In other words, during the recession many shoppers have been pinching pennies by stocking up on frozen food at the nearby supercenter or wholesale club.
Decline in Restaurant Traffic a Plus for Convenience Groceries
Packaged Facts surveys indicate that, in the face of a weak economic and job climate, many consumers have cut back on restaurant meals in favor of groceries. In responding to our Summer 2010 survey, 49% of adults reported that they had eaten less at fast-food restaurants since the recession began, 50% said they’d eaten less fast-food takeout, and 61% said they’d eaten less at sit-down restaurants. Conversely, the percent of adults who strongly agreed that they were spending less on groceries because of the economy was only 15%, while another 28% only somewhat agreed—compared with 12% of adults who strongly disagreed that they were spending less on groceries, and 25% who somewhat disagreed. In other words, restaurants experienced a significant drop-off in consumer demand even as trends in grocery spending remained balanced.In the News
New York, November 9, 2010 — The market for frozen convenience foods will grow 2% by year-end to reach sales of $17 billion in 2010, fueled by a trio of strong performing categories that have offered products able to compete on the basis of freshness and quality with fresh convenience food, according to Frozen Convenience Foods in the U.S. by market research publisher Packaged Facts.
These three categories —frozen pizza, handheld breakfast food, and prepared vegetables —have infused the otherwise ambivalent market with the potential to increase 10% and approach $19 billion in retail sales by 2015. Packaged Facts predicts the sales of frozen foods will thrive as marketers in other categories adopt similar strategies to compete with the parallel fresh convenience food market, restaurant takeout, and meals prepared from scratch by consumers.
"There is considerable activity in the frozen convenience food market and ample opportunities for growth within certain retail sectors and market niches," says Don Montuori, publisher of Packaged Facts. "So while we do not anticipate substantial overall growth, we do expect some segments and individual marketers to grow considerably over the next five years."
During the 2005-2010 period, increased competition from fresh prepared food—whose marketers pushed forward with a wide variety of new menu items and merchandising strategies that dimmed frozen convenience foods’ appeal—was a primary reason why sales growth was driven down. The frozen food categories and individual products that have suffered the most recently have lost out because they are seen as less fresh and more expensive alternatives to cooking from scratch. Packaged Facts forecasts a tough competitive situation involving an increasing onslaught from fresh prepared food will persist.
Conversely, the colossal frozen pizza category and the burgeoning handheld breakfast category thrived when going head-to-head with restaurants and other foodservice outlets in the fight for customer dollars. In addition to their perceived quality and freshness, both categories benefitted from marketer positioning that created an identity as products that were lower-cost alternatives to dining out. Similarly, the prepared vegetable category has triumphed on the freshness front via the development of steaming techniques.
Beyond freshness and quality, Packaged Facts identities several diverse influences affecting the frozen convenience food market, including consumer lifestyles, Americans’ growing concern with health and wellness and higher nutritional demands, demographic shifts, growing interest in world cuisines, and the recession. For example, due to packaging that serves as an excellent canvas for information about nutrition and ingredients, frozen convenience food marketers have an advantage over their competitors in the fresh convenience food sector and foodservice outlets. Likewise, as ethnic foods become more accepted by the general public, frozen food marketers have been expanding their base by further tapping the diversity of America’s ethnic cuisines with new Indian, Japanese and Middle Eastern flavors, among others, while expanding their product range to encompass fusion flavors like Mexican-style, Thai-topped, and Jamaican Jerk pizzas.
Frozen Convenience Foods in the U.S. offers a comprehensive look at this complex market in the context of how it competes while inextricably bound in a cross-competitive situation with fresh convenience food, meals from scratch, and restaurant fare. It contains in-depth analysis of Internet marketing, including detailed accounts of marketing on social networking sites like Facebook. The report also details the complex changes that have taken place in the market since the previous edition, with new attention to competition by retail sector, including supermarkets, supercenters/mass merchandisers, warehouse clubs, small marts and Internet.
About Packaged Facts — Packaged Facts, a division of MarketResearch.com, publishes market intelligence on a wide range of consumer market topics, including consumer goods and retailing, foods and beverages, demographics, pet products and services, and financial products. Packaged Facts also offers a full range of custom research services.