Now There’s a NAFTA QFF Market,
Although the USA Still Dominates

Share of frozen sales for supermarkets in United States versus discount stores depends on category. Canada lags behind USA in per capita consumption. Growth potential in Mexico.

The United States dominates the North American frozen food market, of course. But Canada and Mexico are getting in on the action, too, and with the North American Free Trade Agreement (NAFTA), they may play an increasing role.

Because of different methodologies, Quick Frozen Foods International’s estimates of total frozen food consumption for the USA don’t match those of Food for Thought, the Geneva, Switzerland-based food industry market tracker, but the FFT data offer new insights into the relative strengths of North American markets.

On a per capita basis, US consumption from the Food for Thought database (21.528 billion tons) works out to 72 kilograms. But the per capita rate for Canada, although it seems almost exactly like the US in its economic development, is 43.6 kilograms – about the same as for Scandinavia. Mexico’s rate, at 4.3, is closer to those for post-Communist countries in the Balkans.

Food for Thought gives the highest growth rate to Mexico, at 4.6%, followed by Canada at 2.7%, and thinks the US market is actually shrinking. Data from Information Resources, Inc. (IRI), Chicago, indicate that sales have continued to increase at supermarkets, and at discount stores other than Wal-Mart; and the National Restaurant Association (NRA) reports continued growth of foodservice sales at a rate of about five percent a year - last year’s total was $511 billion. Presumably frozen foods share in that growth.

All data refer to total final human consumption, including retail, catering/foodservice and artisanal/craft, thus excluding industrial consumption and on-farm consumption.
Source: Food for Thought

IRI, the source of market data on frozen foods used as a base by Quick Frozen Foods International, doesn’t report on sales for Wal-Mart, largest retailer in North America and the world. For several years, this magazine has applied a fudge factor to IRI data to allow for Wal-Mart, based on Wal-Mart grocery sales compared to overall supermarket sales. But a report last year, Frozen Foods in the US, published by Packaged Facts, Rockville, Maryland, indicates that the fudge factors should be different for different categories.

In a summary of that report, Packaged Facts estimates that supermarkets account for 75% of the $8.6 billion in sales of frozen dinners, but only 62% of the $8.4 billion in sales for frozen meat, fish and poultry (with poultry accounting for 45% of all sales). In vegetables, supermarkets are said to hold a 79% share of a $3.4 billion market, with plain vegetables accounting for 55% of that (It isn’t clear whether the company includes potato products). In appetizers, supermarkets are credited with a 70% share of a $1.2 billion market. Supermarkets still lead, but are losing ground in the $1.7 billion breakfast foods segment, but Packaged Facts doesn’t give a percentage in its summary.

QFFI has tried to adjust IRI data as best it can in light of these multiple fudge factors, but there is a lot of guesswork involved – especially for segments that go unmentioned by Packaged Facts. There are some market reports that see a decline in frozen food volume, but these apparently don’t account for increasing sales outside supermarkets – not only at Wal-Mart and other discount giants like Target and Costco, but at convenience stores (Sure, their cabinets are small, but there are a lot of them!); dollar stores that have begun carrying frozen food in the past few years; and even some drug chains, notably Walgreens.

As for the foodservice market, the 2007 Economic Census of the United States has been under way this year, and updated results for frozen food manufacturing will hopefully be available within a year from now. But just how much of that $511 billion in foodservice sales is represented by frozen foods remains a guesstimate. In reporting institutional volume based on manufacturing volume less retail sales, QFFI must inevitably be counting a good many products that are produced in frozen form but not sold that way, as with bread and rolls for in-store bake-off, frozen shrimp turned into chilled shrimp rings, and the like. A lot of frozen meat, poultry, seafood and vegetables are recycled into dinners and entrees. And so on: all this may account for discrepancies between QFFI and Food for Thought.

For supermarkets and, at least in theory, other retail outlets besides Wal-Mart, IRI shows a considerable variation in dollar growth patterns for different categories. Processed poultry, for example, was up 5.5% to $1.275 billion, and IQF poultry – the kind usually seen in bulk bags in coffin-type cabinets – 2.3% to $1.204 billion. Overall performance is almost certainly better than that, because Wal-Mart is big on IQF poultry. Dinners and entrees were up 3.8% to $6.212 billion, frozen meat 1.6% to $1.182 billion, and seafood 3.2% to $1.796. Plain vegetables gained 4.4% to $1.613 billion, and snacks and appetizers 4.2% to $947 million.

Frozen turkey – both IQF and processed – outpaced chicken at 12.9% and 26.7%. Frozen carrots were way up at 53.4%, and onion rings advanced 14.1%. On the downside, and perhaps because of health concerns, frozen potato products were off 0.3% to $882 million. Juice concentrates were down 5.9% to 430 million – no surprise there; they’ve been going downhill for years. Desserts and toppings were also off, 2.9% to $604 million.

Sources: Information Resources, Inc. Bureau of the Census, Department of Commerce, QFFI estimates.
All retail poundage and value figures based on IRI data, but with adjustment factors for discount store sales worked in. Institutional data based on projections from 2002 Economic Census, restaurant industry surveys and QFFI estimates.
**includes soups, baby food, coffee creamers, stuffing, tortillas, sauces, spreads, cookies.

In Canada, ready meals are the largest category in dollar terms at $1.333 billon, according to Food for Thought, followed by frozen fish at $1.16 billion and (besides ice cream at $913 million) potato products at $786 million. Frozen fish is the top-selling category in Mexico at $440 million, followed by potatoes at $298 million and (excepting ice cream at $281 million) ready meals at $210 million.

US production of frozen vegetables has been declining for years, according to the American Frozen Food Institute (AFFI), McLean, Virginia, while imports have soared. The US government is slower and slower to publish trade figures, but AFFI’s 2004 Packbook – the most recent available – shows that 901,715,105 kilograms of frozen vegetables were imported that year. Leading the pack were 598,665,500 kilograms of beans and 214,465,600 kilograms of broccoli.