Retail sales surely up at Wal-Mart supercenters, even if supermarket sales lag. Chicken gaining at both supermarkets and fast food chains as healthier and cheaper alternative to red meat.

Frozen food consumption in the United States was up again last year, but instead of fancy entrees, chicken was the hot ticket at both retail and foodservice. Most of the growth on the retail side, moreover, seems to have been at Wal-Mart, Bentonville, Arkansas.

With the largest retailer in the US opening more and more supercenters that include grocery sections the size of the average supermarket, Wal-Mart is taking an increasing share of the overall grocery market, and some categories that seem to be losing elsewhere may actually be gaining.

Information Resources, Inc. (IRI), Chicago, Illinois, shows a 1.8% increase in dollar volume to $20.8 billion, up only slightly from $20.4 billion in 2003 (excluding ice cream). That is nearly all for supermarkets but includes a few discount chains other than Wal-Mart, which won't allow its sales to be reported.

"Top 50" performers, as shown in another IRI report on branded volume, accounted for $11.5 billion in sales, including ice cream. Indeed, two of the top five - private label and Breyers - were ice cream. Two more - private label and Tyson - were chicken. And the remaining one was private label seafood.

For all the hoopla about healthy frozen foods in general and the Atkins diet in particular, the leading healthy frozen entree brands all got clobbered. Stouffer's Lean Cuisine sales were down 12%, Weight Watchers' Smart Ones 2.5% and Healthy Choice 12.5%. Atkins' alternatives didn't show up in the IRI "Top 50." Moreover, Stouffer's conventional Family Entrees were up 16,5% and Banquet Select Menu and Value Menu dinners 11.7% and 6.7%.

True, Swanson's Hungry Man line took a hit, but most likely it lost to other conventional brands. Constant churning of the Lean Cuisine and Healthy Choice lines, with entrees being introduced and then dropped, can't have helped them.

Factoring in Wal-Mart

Total grocery sales - food, beverages and non-food consumables like paper goods and laundry products - accounted for $251.8 billion last year, according to ACNielsen. Wal-Mart reports about $66 billion in grocery sales, and if the percentage for frozen is about the same (8.9%), Wal-Mart would add about $5.8 billion to make the retail total $26.6 billion.

IRI figures show declines in dollar volume and poundage for some basic categories like vegetables. Frozen juice concentrates were off by double digits, but that's nothing new. Frozen dinners and entrees declined 2.1% in dollar terms to $5.475 billion, but were up 0.3% in poundage to 1.973 billion. That may just reflect a trend towards large family sizes - an interpretation reinforced by the fact that unit sales were down 0.4%.

Quick Frozen Foods International has taken IRI figures and added a 26% fudge factor for Wal-Mart. Total retail sales, including convenience stores and membership warehouse clubs other than Wal-Mart's Sam's Club, may be considerably higher. On the other hand, warehouse clubs serve commercial clients such as restaurants as well as ordinary consumers, so much of their volume may be properly attributed to the foodservice segment.

The Foodservice Front

Foodservice sales rose 4.4% to $440.1 billion in 2004, according to the National Restaurant Association (NRA), and that works out to a dollar volume of about $55 billion for frozen foods based on 2003 estimates by QFFI. But other sources suggest it must actually be higher - and that it has been for some time. Overall wholesale frozen food sales were $67.5 billion in 2002, according to the US Economic Census, and markups and other channels of distribution must augment that considerably, especially after two years.

Although frozen foods aren't tracked by any government or trade group, foodservice distributor Sysco reported that 33% of its 2004 sales were in frozens. US Foodservice reported 17%, not including frozen meat; and Performance Food 14%. Based on the 2002 Economic Census, and subtracting retail sales, the largest components of foodservice frozen foods appear to be basic commodities like meat, poultry, fish and seafood, vegetables and french fries, as opposed to elaborate dinners, entrees and bakery products.

The NRA put full-service restaurant sales at $157.9 billion for 2004, and fast food sales at $123.9 billion. Fast food outlets depend heavily on frozen items like hamburgers, chicken portions and french fries, while full-service restaurants are more likely to use frozen vegetables. Institutional foodservice operations use a lot of frozen beef, poultry, fruits, vegetables and juice concentrates. Chances are that QFFI is erring on the conservative side, and we have adjusted dollar volume estimates for the past five years.

Chickening In

Frozen poultry is the fastest-growing retail category, with dollar sales up nine percent to $2.2 billion and poundage up 11.5% to 1.136 billion, according to the IRI report. Bulk packs of chicken parts, both plain and flavored - such as Buffalo wings - are the primary factor. Supermarket chains like Kroger, Cincinnati, Ohio, stock open freezers with huge bags of these, and so does Wal-Mart. If Russia becomes more self-sufficient in chicken, producers will have to look increasingly to the domestic market.

That may be one reason the industry is pushing poultry products on the foodservice side, though chicken had already been gaining against beef at fast food restaurants because it has a healthier image. According to the National Chicken Council, 42% of all chicken is sold through foodservice outlets, with McDonald's alone accounting for 60% of that - more than 600 million pounds last year, including more than 65 million pounds of its upscale Chicken Selects. Burger King has come out with Chicken Fries and Popeyes has Naked Strips - seasoned chicken strips without breading.

Beefing about Beef

Frozen beef isn't doing as well. Sales of hamburgers were up only one percent over the 52 weeks ended last May 31, according to NPD Foodworld, whereas sales of chicken strips and nuggets soared 18%. Chicken now accounts for 30% of the menu at McDonald's, versus 20% in 2002. Meanwhile, beef has taken a big hit on the export market, where the US is laboring under a ban on American imports imposed by Japan at the end of 2003 after a single case of Mad Cow Disease was discovered in the State of Washington, and several other countries followed suit.

Bone-in US beef exports plummeted from110,181 tons and $377.1 million in value in 2003 to 2,993 tons and $13.5 million last year. Boneless beef exports fell from 280,644 tons and $953.3 million to 22,096 tons and $70.2 million. Beef liver shipments fell from 90,686 tons and $72.2 million to 55,333 tons and $38 million. At press time, the American Meat Institute was pressing once again to lean on the Japanese government to lift the ban, which helped to swell the overall imbalance of frozen food trade - $11.8 billion imports to only $5.5 billion exports.

Shrinking Shrimp?

It's too early to gauge the long-term impact of punitive tariffs on imported shrimp, imposed late last year to protect a domestic wild catch and processing industry that has since been clobbered by Hurricane Katrina. Asian countries impacted by the tariffs have been looking to other markets, especially Europe. US imports for 2004 were slightly lower for shell-on shrimp than in 2003, but higher for peeled and prepared product in poundage terms. Prices were lower, but tariffs are bound to increase them - or else discourage imports altogether. Without wild-caught domestic shrimp to take up the slack for cheaper farm-raised shrimp imports that fueled the boom of recent years, that boom could turn into a bust.